Council Regulation (EC) No 2533/98Show full title

ANNEX A THE LIMITS OF THE NATIONAL ECONOMY

2.04. The units, whether institutional, local kind-of-activity or of homogeneous production, which constitute the economy of a country and whose transactions are recorded in the ESA, are those which have a centre of economic interest on the economic territory of that country. These units, known as resident units, may or may not have the nationality of that country, may or may not be legal entities, and may or may not be present on the economic territory of the country at the time they carry out a transaction. Having thus defined the limits of the national economy in terms of resident units, it is necessary to define the meaning of the terms economic territory and centre of economic interest.

2.05. The term economic territory means:

(a)

the geographic territory administered by a government within which persons, goods, services and capital move freely;

(b)

any free zones, including bonded warehouses and factories under customs control;

(c)

the national air-space, territorial waters and the continental shelf lying in international waters, over which the country enjoys exclusive rights(1);

(d)

territorial enclaves, i.e. geographic territories situated in the rest of the world and used, under international treaties or agreements between States, by general government agencies of the country (embassies, consulates, military bases, scientific bases, etc.);

(e)

deposits of oil, natural gas, etc. in international waters outside the continental shelf of the country, worked by units resident in the territory as defined in the preceding subparagraphs.

2.06. The economic territory does not include extraterritorial enclaves (i.e. the parts of the country's own geographic territory used by general government agencies of other countries, by the institutions of the European Union or by international organisations under international treaties or agreements between States(2).

2.07. The term centre of economic interest indicates the fact there exists some location within the economic territory on, or from, which a unit engages, and intends to continue to engage, in economic activities and transactions on a significant scale, either indefinitely or over a finite but long period of time (a year or more). It follows that a unit which carries out such transactions on the economic territory of several countries is deemed to have a centre of economic interest in each of them. The ownership of land and buildings within the economic territory is deemed to be sufficient in itself for the owner to have a centre of economic interest there.

2.08. On the basis of these definitions, units deemed to be residents of a country can be sub-divided into:

(a)

units which are principally engaged in production, finance, insurance or redistribution, in respect of all their transactions except those relating to ownership of land and buildings;

(b)

Units which are principally engaged in consumption(3), in respect of all their transactions except those relating to ownership of land and buildings;

(c)

all units in their capacity as owners of land and buildings with the exception of owners of extraterritorial enclaves which are part of the economic territory of other countries or are States sui generis (see paragraph 2.06).

2.09. In the case of units which are principally engaged in production, finance, insurance or redistribution, in respect of all their transactions except those relating to ownership of land and buildings, the following two cases may be distinguished:

(a)

activity conducted exclusively on the economic territory of the country: units which carry out such activity are resident units of the country;

(b)

activity conducted for a year or more on the economic territories of serveral countries: only that part of the unit which has a centre of economic interest on the economic territory of the country is deemed to be a resident unit. It may be:

1.

either an institutional resident unit, whose activities conducted for a year or more in the rest of the world are excluded and treated separately(4), or

2.

a notional resident unit, in respect of the activity conducted in the country for a year or more by a unit which is resident in another country.

2.10. In the case of units which are principally engaged in consumption, except in their capacity as owners of land and buildings, households which have a centre of economic interest in the country are deemed to be resident units, even if they go abroad for short periods (less than a year). They include, in particular, the following:

(a)

border workers, i.e. people who cross the frontier daily to work in a neighbouring country;

(b)

seasonal workers, i.e. people who leave the country for several months, but less than a year, to work in another country in sectors in which additional manpower is needed periodically;

(c)

tourists, patients, students(5), visiting officials, businessmen, salesmen, artists and crew members who travel abroad;

(d)

locally recruited staff working in the extraterritorial enclaves of foreign governments;

(e)

the staff of the institutions of the European Union and of civilian or military international organisations which have their headquarters in extraterritorial enclaves;

(f)

the official, civilian or military representatives of the government of the country (including their households) established in territorial enclaves.

2.11. All units in their capacity as owners of land and/or buildings which form part of the economic territory are deemed to be resident units or notional resident units of the country in which the land or buildings in question are located.

(1)

Fishing boats, other ships, floating platforms and aircraft are treated in the ESA just like any other mobile equipment, whether owned and/or operated by units resident in the Country, or owned by non-residents and operated by resident units. Transactions involving the ownership (gross fixed capital formation) and use (renting, insurance, etc.) of this type of equipment are attributed to the economy of the country of which the owner and/or operator respectively are resident. In cases of financial leasing a change of ownership is assumed.

(2)

The territories used by the institutions of the European Union and international organisations thus constitute the territories of States sui generis. The feature of such States is that the only residents are the institutions themselves (see paragraph 2.10(e)).

(3)

Consumption is not the only possible activity of households. Households may as entrepreneurs engage in any kind of economic activity.

(4)

It is only where such activity is carried on for less than a year that it should not be separated from the activities of the producer institutional unit. This may also be done where the activity, though conducted for a year or more, is insignificant, and in all circumstances for the installation of equipment abroad. However, a unit which is resident in another country and which is carrying out a construction activity in the country for a duration of less than a year is deemed to have a centre of economic interest on the economic territory of the country if the output of the construction activity constitutes gross fixed capital formation. Such a unit should therefore be treated as a notional resident unit.

(5)

Students are always treated as residents, however long they study abroad.